History of SSA During the Johnson Administration 1963-1968


The medical insurance program is an indemnity program designed to reimburse the beneficiary, or pay on his behalf, reasonable charges incurred for physicians' services and certain other medical services,and the reasonable costs for certain provider services, subject to applicable deductible and coinsurance amounts. {55} Proper payment involves the determination that the service for which a charge is incurred is covered under the program and medically necessary and that the charge (or cost where applicable) for the service is reasonable.

The statute provides for the use of private insurance carriers in the administration of this part of the program. In selecting carriers to pay claims on behalf of the program, the Administration considered the experience and the capability of the applying organization to administer claims under the program and the need to provide a sufficient variety oforganizations to afford a basis for comparison of performance. {56}

While the carrier organizations are responsible under the statute and their contracts for the proper payment of claims, the final responsibility for the proper administration of the program rests with the Department. To carry out this responsibility, the Department has issued regulations and guidelines for the administration of medical insurance claims that are designed to assure that the administration of the program will be prudent, economical, and consistent with the statute and the intent of Congress. In addition, the Department conducts audits and performance reviews to assess the quality of carrier performance.

Determination of Reasonable Charges

The law does not contemplate establishment of a general fee schedule applicable to all physicians and suppliers of covered medical services nor that the beneficiary's income will be taken into consideration in determining the amount of the payment that is made for services furnished to him. Rather, the law calls for individual determinations by the carrier which take into account the customary charges of the physician, and the prevailing charges in the locality for similar services. In addition, carriers are required to assure that the charges determined to be reasonable for Medicare beneficiaries are not higher than the charges applicable for comparable services under comparable circumstances to their own policyholders and subscribers. In effect, payment is to be made on the basis of the lowest of the following: (1) actual charge made by the physician, (2) the charge he customarily makes for similar services, (3) the prevailing charges in the locality for similar services, or (4) the charge applicable for similar services under comparable circumstances under the carrier's own policies.

To provide for consistency among carriers in the application of the reasonable charge criteria in the statute and to establish the standards against which carrier performance would be evaluated, the Department formulated and promulgated guidelines to clarify and interpret thereasonable charge criteria set forth in the law, and to suggest methods for implementing these criteria. These guidelines were subsequently published as proposed regulations in the Federal Register of February 8, 1967, and as final regulations on August 31, 1967.

The process of making reasonable charge determinations involves a review by the carrier of each bill. While the sequence of procedures followed may vary from carrier to carrier, the overall process involves checking each bill against data previously compiled on the physician's customary charges and the prevailing level of charges in the locality in which the physician practices. A number of carriers have already computerized or are in the process of computerizing this phase of the process. Charges for services involving unusual medical complications or which otherwise pose special questions are referred for review by physicians or specially trained personnel on the carrier's staff and, where appropriate, consultations are held with the physician or supplier involved and medical society review committees.

Medical Insurance Coverage in the Hospital Setting

Some of the most complex problems in the administration of the program resulted from the need to identify and determine the reasonable charges for services that, while rendered in a hospital setting, are excluded under the hospital insurance part of the program and covered under the medical insurance part of the program. Such services include all physicians' services (except for the services of residents and interns under approved training programs) and outpatient therapeutic services. (Outpatient diagnostic services were covered until April 1, 1968, under the hospital insurance part of the program). To determine the respective liabilities of the two parts of the program and to determine the patient's liabilities under the differing but interacting deductible and coinsurance provisions of the two parts of the program, it was necessary to break down specific services into components--identifiable services to individual patients by physicians as opposed to supporting hospital services and outpatient therapeutic services as opposed to outpatient diagnostic services--solely for Medicare purposes. While an effort was made to apply the law as simply as possible, the result was serious recordkeeping and billing problems for hospitals and misunderstanding among beneficiaries. To alleviate these difficulties, the Department sought changes in the law that would permit simplification of the procedures involved; such changes were enacted under the 1967 amendments to the Social Security Act.

Hospital-Based Physicians

The Department developed comprehensive principles for the reimbursement of hospital-based physicians in consultation with all interested parties and the Health Insurance Benefits Advisory Council. These principles were distributed to intermediaries, carriers, hospitals, and professional groups in January 1966, published as proposed regulations on June 28,
1966, and as final regulations on October 18, 1966. The regulations are designed to be responsive to, but not interfere with, the arrangements adopted by hospitals and hospital-based physicians. However, these regulations did require agreement between hospitals and physicians for the identification of compensation to the physician for services to individual patients as a basis for the reasonable charge determinations to be made under the law.

By the end of the first year of operation, acceptable agreements had been reached by most participating hospitals and the hospital-based physicians. Continuing difficulty was nonetheless experienced throughout the first year of operation with respect to the split billing required under Medicare for radiologists' and pathologists' services that would normally be billed by the hospital on a consolidated basis. To permit administrative simplification and to bring Medicare coverage into line with most other health insurance programs, the 1967 amendments to the Social Security Act eliminated the medical. insurance deductible and coinsurance amounts with respect to radiological and pathological services.

Outpatient Services

In adopting policies and procedures the Social Security Administration made every effort to simplify the distinctions that had to be made between identifiable physicians' services to individual patients and other hospital services, and between diagnostic services and therapeutic services, in billing for outpatient services under Medicare. However, the administrative costs and difficulty encountered by hospitals in preparing outpatient bills was disproportionate to the small amounts involved. In addition, hospitals were often unable to determine the patient's deductible status at the time the service was rendered and, once the patient had left the hospital premises, it was difficult to collect the small amounts involved.

In response to these problems, the Department sought, and the Congress enacted, under the 1967 amendments, a change in the law consolidating all coverage of outpatient hospital services under the medical insurance part of the program and eliminating the $20 deductible for outpatient diagnostic services. This change, along with an additional provision allowing hospitals to bill Medicare patients directly for small outpatient charges, will simplify administration, reduce hospital recordkeeping and billing problems, and facilitate beneficiary understanding of the program.

Physicians' Services Rendered in a Teaching Setting

Another area that required special attention was payment for physicians' services rendered in a teaching setting. Services rendered in a teaching setting often involve both the services of residents and interns under approved graduate medical education programs, which are covered under the hospital insurance part of the program on a cost basis, and services of attending physicians, which are covered under the medical insurance part of the program on a charge basis. The Department developed and promulgated regulations for determining reasonable charges in a teaching setting that clarify the conditions under which payment is to be made for services by the attending physician. These regulations specify that a charge should be recognized under the medical insurance
program for the services of an attending physician that involve residents and interns in the care of his patient only if the physician's servicesto the patient are of the same character, in terms of the responsibilitiesto the patient that are assumed and fulfilled, as the services he renders to his other paying patients.

Billing Procedures

Under the law as originally enacted, and during the first year of operation, payment for the services of physicians and suppliers could be made in one of two ways. Under one of these methods, the physician or supplier billed the patient directly, and, after having paid the bill, the patient submitted the itemized receipted bill to the carrier for payment. Under the other method, the physician or supplier accepts an assignment of the patient's claim and requests payment directly from the carrier. In accepting an assignment under the program, the physician or supplier agrees to accept as full charge for the services the amount that the carrier determines to be the reasonable charge, and to bill the patient for no more than the unmet portion of the annual $50 deductible amount plus the applicable coinsurance amount (20 percent of the reasonable charge).

In the year ending June 30, 1968, nearly 57 percent of all medical insurance bills were paid on an assignment basis. This figure includes the bills of hospital-based physicians, who are usually paid under the assignment method. Excluding bills of hospital-based physicians, nearly 48.5% of the medical insurance bills paid in the first year of the program were paid on the basis of assignments.

Although many physicians were accepting assignments at least part of the time, there were instances where a physician preferred not to accept assignment, even though the beneficiary was not in a position to pay the bill. In recognition of the hardship imposed on Medicare patients or their families in such cases, the 1967 amendments removed the requirement of a receipted bill as a basis for reimbursement where the physician is unwilling to accept assignment of medical insurance benefits. Thus, payment now may be made either to the patient on the basis of an itemized bill--paid or unpaid--or to the physician under the assignment method.

Determination of Coverage and Appropriate Utilization of Services

As previously mentioned, the determination of whether the service for which the charge is rendered is covered and medically necessary is the responsibility of the carriers under the provisions of the law and the terms of their contracts with the Government. To carry out its basic responsibility for the overall administration of the program, the Social Security Administration has issued instructions explaining and interpreting the coverage provisions and exclusions set forth in the law. However, the application of the criteria involved requires judgment and experience in dealing with the medical profession.

The carriers have been required to develop methods for identifying claims involving possible unnecessary utilization of services and to resolve these claims through review by medical consultants, the physicians involved and, where appropriate, local medical societies. The effectiveness of these methods is considered in audits of carrier operations.

Reimbursement of Group Practice Prepayment Plans

Most services covered by the medical insurance program are rendered on a fee-for-service basis. However, services furnished under group practice prepayment plans are normally rendered in return for predetermined premium payments. In recognition of the need for special adaptation of the Medicare payment procedures for services rendered by group practice prepayment plans, the law provides that an organization which furnishes medical and other health services (or arranges for their availability) on a prepayment basis, may elect to be paid 80 percent of the reasonable cost of services in lieu of 80 percent of the reasonable charge for such services.

Great care was exercised in developing and refining guidelines for the reimbursement of the 24 group practice prepayment plans that are being reimbursed directly by the Social Security Administration on a reasonable cost basis and the 42 group practice prepayment plans that are reimbursed through carriers on a reasonable charge basis. This included careful and ongoing consultation with the plans themselves to assure that the methods were as responsive as possible to the variety of group practice prepayment plan arrangements in existence throughout the country.

In spite of the care taken in developing the methods for reimbursing group practice prepayment plans and the continuing efforts to refine and adapt these methods as experience developed, it has not been possible to accommodate all of the plans in every respect. Many plans, believe that to fully realize the incentives for efficiency and economy in the utilization of health care services under their methods of operation Medicare would have to reimburse them for services under both the hospital and medical insurance parts of the program on the basis of prospectively determined capitation payments, rather than on the basis of the cost of services actually rendered to Medicare beneficiaries. While such an approach is not possible under present law, the Department is giving high priority to testing various methods of reimbursing group practice prepayment plans under the authority to experiment with alternative bases for reimbursement granted by the 1967 amendments to the Social Security Act.

Experience under the Medical Insurance Program

During the first two years of the program, almost $2.1 billion {57} was paid in supplementary medical insurance benefits. Payments ranged from a low of $96.8 million in July 1967 to a high of $129.7 million in March 1968. This growth in benefit payments is shown in the following chart. {58}


A total of 40.3 million medical insurance bills were approved for payment and recorded in the Social Security Administration's records for the fiscal years 1967 and 1968. {59} Of this total, 83 percent were for physicians' services. Total reasonable charges for the 40.3 million bills amounted to $2,467,211,000. {60}

Of the 33.3 million recorded bills for physicians' services, 14 percent were for surgical and 86 percent were for other medical bills. Reasonable charges for surgical bills amounted to $815 million and averaged $171 perbill. Reasonable charges for other medical bills amounted to$1.46 billion and averaged $51 per bill. {61}

Use of Current Medicare Survey to Obtain Current Medical Insurance Utilization Data

Utilization data based on medical insurance claims paid and recorded cannot provide current information because of the inherent lapse of time between the incidence and reporting of covered services. Physicians may put off sending bills to patients. Beneficiaries are instructed to accumulate bills until charges exceed the $50 deductible, and some hold bills until after the close of the year in which the services were rendered. Because of the time lapse, it was anticipated that the data derived from recorded experience would be inadequate for current needs.

To provide current information on the incidence of covered services under the medical insurance program and the resulting charges incurred against the Federal Supplementary Medical Insurance Trust Fund, the Current Medicare Survey (CMS) was developed. Data are obtained through periodic interviews with a scientifically selected sample of people enrolled in the medical and hospital insurance programs. The interviews are conducted by the Bureau of the Census for the Social Security Administration so as to provide these data about three months after the reference period,considerably in advance of the time adequate data could become available from recorded experience. {62}

Use of and Charges for Medical Services

Current medical survey data on the use of and charges for covered medical services have been collected for the first 12 months of the program's operation. Because the data need to be analyzed on both a fiscal andcalendar year basis, they are divided into two parts. The first covers the period July through December 1966, the first six months the program was in effect. The second covers the first six months of calendar year 1967; the two periods together comprise fiscal year 1967. Comparison of data for the two periods indicates no startling difference in use of services. During each period, about 32 million people, or two-thirds of all medical insurance enrollees exposed to risk, used covered medical services. {63} Among the group using covered services, a significantly larger proportion used sufficient services during the second 6-month period to meet the $50 deductible requirement. During the first six months the program was in effect, approximately four million people, or about 34 percent of those using medical services, incurred charges in excess of $50. By contrast, more than five million aged persons, or 44 percent, fell into this category during the six months ending June 1967. {64} This increase is partly due to the effect of the provision permitting the carryover of expenses incurred in meeting the $50 deductible during the last quarter of a calendar year (October-December, as a credit toward the deductible for the next calendar year. It also reflects the rise in medical care costs, and may reflect some seasonal effects--possibly greater use of services in the first than in the second half of the calendar year. Thus, a significantly higher proportion of patients reached the $50 deductible during the second six-month period, even though approximately the same number of people used covered medical services during the two periods.

Average charges per person for covered services increased during the second six months of the program. During the first six months, charges averaged $84; during the second six months, they averaged $87, a 3.6 percent increase. For people who had not met the deductible by the end of each of the six-month periods, charges averaged less than $20. For those who had met the deductible, average aggregate charges were about $200 for the latter half of 1966 and $170 for the next six-month period. This drop in average charges for the latter period among people who had met the deductible probably resulted from the carryover provision, which permitted them to meet the deductible for 1967 with less than $50 in charges during 1967 whereas the minimum in 1966 was $50.

Use of and charges for medical services among the aged differed to some extent by age and sex. The proportion of enrollees using covered medical services increased with age--from 66 percent for people aged 65-74 to 74 percent for people aged 85 and over. A somewhat larger proportion of aged women used medical services than did aged men--71 and 62 percent, respectively. {65} In addition, average charges increased with age--from $83per enrollee in the youngest age group to $109 in the oldest age group. Average charges for women, however, were lower. {66}

The proportion of enrollees who used covered medical services and met the $50 deductible varied by region, ranging from less than 27 percent in the South to nearly 37 percent in the West. Average charges also varied considerably by region--from $80 per enrollee in the South to $109 in the West. This difference in average charge was apparently due in substantial part to the higher proportions of beneficiaries using services. The difference in charges for those who met the deductible was much smaller proportionately, $171 in the South and $184 in the West.

The Medicare Statistical Program

It should be noted here that the Current Medicare Survey is but one aspect of the Social Security Administration's statistical program. For Medicare will have a significant impact on the organization, provision, and financing of health and medical care in this country. Information on the broad scope of benefits and the large population group involved has been incorporated in a comprehensive data collection system that will provide the means for evaluating the effectiveness of the program.

The primary objective of the Medicare statistical system is the provision of data required to measure and evaluate the operations and the effectiveness of the two parts of the program. The benefit payment operation furnishes the means of obtaining extensive, systematic, and continuous information about the amount and kind of hospital and medical care services used by the aged, as well as the cost of such services. The applications of the hospitals and the extended care facilities to participate in the program provide data on the characteristics of such providers of services. The claim number that is assigned to each individual serves as a link between the various services utilized under the program and the demographic characteristics of each individual recorded in the eligibility files.

The data collection system has two inherent characteristics that determine to a considerable degree the scope, detail, and flexibility of the available data. First, data are collected and maintained on an individual basis so that the beneficiary and his medical experience under the program form the basic unit. Second, records for each bill paid under the hospital insurance program and for a sample of beneficiaries under the medical insurance program are maintained on a centralized basis. Except for intermediary operations, operating statistics such as those relatingto workloads, time length, cost and the like, all program statistics are centrally prepared. {67}

Monthly Variations

Current Medical Survey provides monthly data in addition to the cumulative information. These monthly data are subject to greater sampling variances than the cumulative data, of course, but they provide an insight into the month-to-month fluctuations in the extent of medical services used by a large population group. During each of the first 12 months of Medicare, about one-third of the medical insurance enrollees used covered medical services under the program. The proportion ranged from a low of 30.4 percent in December 1966, to a high of 35.1 percent in May 1967. In aggregate terms, the number ranged from 5.3 million people in December to 6.2 million in May. {67}

The effect of the deductible carryover provision may be seen clearly by comparing the number and proportion of people who used services meeting the deductible during the first month of the new calendar year (January 1967) with the corresponding figures for the first month of Medicare's operation. By the end of January 1967, 1.3 million people had met the deductible, more than twice thenumber who did so in the first month of the program. Since the proportion using covered medical services did not vary substantially and the rise in physicians' charges was not large enough to account for the difference, the difference can be traced to the effect of the carryover provision.

As would be expected, the proportion of enrollees using medical services who met the $50 deductible increased significantly as the year progressed. By the end of December 1966, about one-half of those using services had met the deductible; the proportion had increased to three-fifths by the end of June 1967.

Carrier Performance in Processing Medical Insurance Bills

Receipt of medical insurance bills began slowly, but increased dramatically as the fiscal year progressed and more and more beneficiaries met the $50 deductible and submitted bills for payment. At first, carriers experienced difficulty in processing medical insurance claims in the quantities in which they were received. As illustrated by the following table, clearances fell substantially behind receipts, and by the end of January 1967, an accumulation of almost 2.8 millionbills was pending disposition in carrier offices across the country. {68}

Medical Insurance Carrier Workloads
(July 1966 -- June 1968)


Bills Received

Bills Cleared

Bills Pending Disposition


FY 1967

FY 1968 {69}

FY 1967

FY 1968 {69}

FY 1967

FY 1968 {69}

July 72,400 3,207,100 32,740 3,373,000 39,700 1,928,400
August 640,700 3,502,800 250,300 3,741,200 430,100 1,690,000
September 1,232,900 3,191,800 712,500 3,167,400 950,500 1,714,400
October 1,647,100 3,649,300 1,036,600 3,604,000 1,561,000 1,759,704
November 1,702,900 3,630,804 1,484,400 3,502,800 1,779,500 1,887,700
December 2,356,800 3,826,700 1,918,600 3,274,600 2,217,700 2,437,400
January 2,968,600 5,092,000 2,388,000 3,962,800 2,798,300 3,566,600
February 2,824,700 4,199,700 2,837,800 4,196,900 2,785,200 3,757,500
March 3,251,700 4,169,300 3,424,700 4,711,000 2,612,200 3,174,500
April 2,962,300 4,292,304 3,358,000 4,478,000 2,216,500 3,002,000
May 3,298,900 4,210,600 3,522,000 4,460,100 1,993,400 2,752,500
June 3,499,100 3,526,800 3,400,504 3,843,300 2,092,000 2,436,000
TOTALS 26,458,300 46,499,200 24,366,300 46,315,000    

Beginning with February and continuing through May 1967, clearances exceeded receipts. By June, the pending load had been reduced by over 706,000 bills from the maximum reached in January, and the number of weeks of work on hand had dropped from an August 1966 high of 7.9 weeks to 2.7 weeks at the end of June. Paralleling this improvement was a substantial reduction in the percentage of pending bills which were pending over 30 days; these dropped from a November high of 30.1 percent to 15.2 percent by the end of the following June. The following table illustrates these changes.

Performance Indicators for Medical Insurance Carriers
(July 1966 -- June 1968)


Ratio of clearances to receipts

Weeks work pending

Percentage of bills pending over 30 days


FY 1967

FY 1968

FY 1967

FY 1968

FY 1967

FY 1968

July 45.2% 105.2% 4.9 2.3 -- 17.2%
August 39.1 106.8 7.9 2.1 3.5% 15.0
September 57.8 99.2 5.6 2.2 16.5 16.2
October 62.9 98.8 6.3 2.1 24.3 14.3
November 87.2 96.5 5.0 2.3 30.1 12.4
December 81.4 85.6 4.9 3.0 23.4 11.7
January 80.4 77.8 4.9 4.0 24.7 11.2
February 100.5 99.9 3.5 3.6 22.9 13.6
March 105.3 113.0 3.3 2.9 23.8 20.1
April 113.4 104.3 2.6 2.9 21.2 23.2
May 106.8 105.9 2.5 2.7 19.6 25.4
June 97.2 109.0 2.7 2.5 15.2 24.8

A number of factors caused the development of larger than desirable backlogs in the operations of several carriers. Coverage of physicians' services in their offices with only a $50 deductible was relatively unusual in insurance, and the processing of a very large number of small bills was not a task with which carriers had much familiarity. Furthermore, the payment of bills under the "reasonable charge" concept proved to be more complex than many carriers had anticipated. Consequently, initial staffing had to be adjusted, and some carriers in tight labor areas had difficulty in recruiting additional staff.

Same carriers encountered difficulty in obtaining equipment and in integrating relatively complex program requirements with other EDP systems. Furthermore, many incomplete claims were submitted during the early months of the program's operations, and had to be returned for additional information. The majority of the returned claims were those sent in by older people whose physicians chose to bill them directly. Claims sent in by physicians were more often complete.

A vide and varied range of actions were initiated by carriers and the Administration to simplify operations, overcome operational problems and expedite claims processing. Individual arrangements were made between almost every carrier and its counterpart Social Security Administration district office for district office assistance in perfecting claims which contained incomplete or incorrect information. The statistical reporting requirements for carriers were substantially reduced temporarily to free their staffs for the more critical claims processing activities. Carriers made appropriate use of overtime where staffing problems existed. And, in some instances, personnel from Social Security Administration district offices, payment centers, and central office were detailed to carriers for brief periods to help meet emergency situations.

The results of these combined efforts were reflected in the dramatic increase in carrier productivity and in the marked decrease in the number of bills pending. Performance indicators reflected a remarkable improvement in carrier claims processing by the end of the first fiscal year.

As the administrative design of the program took shape it was found, as had been anticipated, that there was no industry-wide agreement on the approach to reasonable charge determinations and that many carriers would need to modify their approach to charge determinations considerably to meet the intent of the Medicare law. In this climate it was clear that uniform application of the reasonable charge provisions of the law would require the promulgation of guidelines interpreting the reasonable charge provisions and setting forth the standards against which carrier performance would be judged. And, as noted earlier, such guidelines were developed, promulgated, and finally published as regulations.

At the same time, it was recognized that simply publishing guidelines setting forth the intent of the law and suggesting methods of implementation would not, in itself, create the capacity to take into account the physicians' customary charges and the prevailing charges in the locality for similar services where neither the basic data nor the systems for making such determinations existed. These guidelines, however, do provide common understanding of the data and systems that are required for acceptable reasonable charge determinations under the medical insurance program and furnish a common yardstick for measuring carrier performance of this function.

The Social Security Administration has worked closely with carriers in their efforts to refine all aspects of claims processing, including the determination of reasonable charges. Moreover, the effectiveness with which customary and prevailing charges are taken into account in making reasonable charge determinations has been given heavy emphasis in carrier performance reviews. Reviews are conducted at the actual work stations to ascertain and evaluate the guides and screens being used for reasonable charge, coverage, medical necessity, and appropriate utilisation determinations. Deficiencies and necessary corrective actions are discussed with technical staff as well as top management and followed up by central office and regional office staff of the Social Security Administration.

Administrative Costs of Carrier Operations

Partly because the flow of bills to the medical insurance carriers started at a relatively slow pace, the ratio of administrative expenses to benefit payments was relatively high at the start of the program. However, with the flow of medical insurance claims increased and carrier productivity improved as employees became more familiar with Medicare requirements, the ratio declined from 16.4 percent for the six months ending Decealber 31, 1966, to 11.1 percent for the nine months ending March 31, 1967; and for the entire year the ratio of carrier administrative costs to benefit payments was 9.4 percent.

Despite anticipated increases in wages, rents, supplies, and other operating costs, the ratio of costs to benefit payments is expected to be lower for many organizations in fiscal year 1968 than in fiscal year 1967. This reduction is anticipated as a result of improved employee productivity, increased mechanization of the claims process, and the likelihood of a relatively stable flow of medical insurance claims throughout the year.

Footnotes (Footnote numbers not same as in the printed version)

{55} Provider services paid on the basis of reasonable costs include up to 100 home health visits in addition to, and without the prior hospitalization requirement applicable to, the home health services covered under the hospital insurance part of the program. Provider services also include other medical or health services (other than physicians' services unless furnished by a resident or an intern under an approved training program) furnished by or through a hospital, extended care facility, or home health agency.

{56} Organizations serving as carriers are listed in Appendix A, Exhibit 6.

{57} Excludes $5 million of carrier benefit payments which had not cleared through the Treasury before July 1, 1967.

{58} A distribution of medical insurance benefit payments, by State, in the year ending June 34, 1968, appears in Appendix D, Exhibit 1.

{59} Recorded in social security central records as of June 30, 1968.

{60} The program pays 80 percent of the reasonable charges for covered services each year after the beneficiary has incurred $50 of such charges during the year. Also, see Appendix D, Exhibit 6.

{61} See Appendix D, Exhibit 7.

{62} The CMS design calls for monthly personal interviews of nearly 4,000 people selected from the primary 5 percent statistical sample of those enrolled in the medical and hospital insurance programs. The sample represents the 17.5 million people residing in the 50 States and the District of Columbia who were enrolled for medical insurance benefits as of July 1, 1966. People selected in July remained in thesample through the end of December 1966. A second sample was selectedfor interviews starting in October 1966. This group will remain in the survey for 15 months. In addition, there is a small incremental sample representing people who "age into" the universe each month. Experienced field interviewers contact beneficiaries individually to obtain information about the use of medical care and related services during the preceding month. A careful editing and screening process
identifies those items not covered by the program. Charges are accumulated so that the total covered charges for an individual may be located along a continuum from any point below the deductible to any point above.

Analyses of the data from the CMS have been published in the Social Security Bulletin and in the periodic R&S Health Insurance Statistics Report, copies of which are attached. Included are estimates of the number of medical services, place and type of service, charges forthese medical services, potential reimbursement from SSA, and source of payment for the portion not covered by Medicare. Data are also collected on a regular basis for prescription drugs to provide an estimate of the cost of these noncovered medical expenses and the effect that these expenses would have on potential reimbursement if covered.

The monthly collection of current data on the use of and charges for covered and uncovered hospital and medical care services and the periodic collection of supplementary information under the CMS will provide considerable data to evaluate the program and measure its performance. Included will be special analyses on the number and socioeconomic characteristics of persons who do not meet the deductible and the amount and type of services used by such persons. In addition, the demographic and economic data collected in supplements to the CMS will provide the basis for analysis of the effect of financing of a major portion of the health care costs of the aged person on his purchasing power, spending patterns, and level of living.

{63} Population at risk represents people enrolled at any time during a period covered by the data. If the period is one month, this population is the same as the enrolled population. If the period is two or more months, it includes those who may have been enrolled for any part of the period; for example, people reaching age 65 and enrolling in the second or later months, people who died in the interval, and people who terminated their insurance at any time during the period.

{64} See Appendix D, Exhibit 8.

{65} See Appendix D, Exhibit 9.

{66} See Appendix D, Exhibit 10.

{67} The attached article by Mr. Howard West entitled, "Health Insurance for the Aged: The Statistical Program," which appeared in the January 1967 issue of the Social Security Bulletin, outlines the various components of this statistical system for collection and maintenance of data on the utilization and financing of hospital and medical services. Included is a description of the five distinct but related computer-tape record systems: master eligibility record, provider record, hospital insurance (part A) utilization record, medical insurance (part B) payment record, and the record containing a sample of the medical insurance bills. The article also presented some preliminary estimates of the number of hospitals and home health agencies participating under the program.

During the first two years of the program much of the statistical effort of the Medicare program has been directed to the further development, testing, and refinement of the data collection system. A series of articles and reports have been issued on the operations and effectiveness of the program. Included are the following:

"Enrollment in the Health Insurance Program for the Aged," Social Security Bulletin, March 1967, pages 21-24.
"Health Insurance for the Aged: Claims Reimbursed for Hospital and Medical Services," Social Security Bulletin, May 1967, pages 3-7.
"Health Insurance for the Aged: Participating Extended-Care Facilities," by David Allen, Social Security Bulletin, June 1967, pages 3-8.
"Health Insurance for the Aged: Participating Home Health Agencies," by David Allen, Social Security Bulletin, September 1967, pages 12-17.
"Current Data from the Medicare Program, by Dorothy P. Rice, R&S Health Insurance Statistics, HI-1, November 20, 1967.
"Blood Utilization by Inpatients Under Medicare," R&S Health Insurance Statistics, HI-2, November 30, 1967.
"Number of Persons Using Medicare Services, July 1, 1966 - June 30, 1967." R&S Health Insurance Statistics, HI-3. February 5, 1968.
"Medicare and Care of Mental Illness, by Marcus S. Goldstein, R&S Health Insurance Statistics, HI-4, March 7, 1968.
"Enrollment of Aged Public Assistance Recipients in the Medical Insurance Program Under Social Security," by Arne Anderson, R&S Health Insurance Statistics, HT-5, March 11, 1968.
"Health Insurance for the Aged: Number of Participating Health Facilities, July 1967, by State," by Aaron Krute, R&S Health Insurance Statistics, HI-6, April 8, 1968.

{67} See Appendix D, Exhibit 11.

{68} See revised tables for fiscal year 1968.

{69} Preliminary data.